The first cash rebate credit cards were offered by Discover. Discover’s Cashback program rewarded consumers for the purchases made on their Discover card by letting them earn actual money back. Once other companies saw the popularity Discover gained form this program they begin to offer their own cash rebate credit cards.
Cash rebate credit cards work by figuring a percentage of each purchase made into the cash rebate. Of course, the credit card company is not going to give a person back the amount they spent, but rather they figure a percentage and that is the actual rebate. Some cards have teamed up with certain companies so that purchases made form these companies offer a higher cash rebate percentage. This not only benefits the credit card company, but also those stores they team up with as people are more likely to shop there because they get more cash back on those purchases.
Cash rebate credit cards seem like a great idea and many people have gotten them simply for the reward. However, they are still a credit card and that fact can sometimes be overlooked. It is often tempting to use the card just to get the reward which can lead to overspending. This is especially true when it comes to partnership between a credit card company and a store. A person may shop at that certain store just to get the higher reward percentage, but they might lose out. For example, a person buys socks from the credit card partner vendor for $4 and they get a higher rebate percentage which equals $1, which make the final cost $3.
The problem is that they could have shopped at a different store and gotten the socks for $3 with a lower rebate percentage which equals $.30, which makes the final cost $2.70. They ended up spending more, even with the higher rebate percentage. This type of shopping for rewards is what leads to problems with this type of card. This is the reason that getting a cash rebate credit card requires good credit. These cards are very selective and a person should have a good credit rating in order to be approved.
Cash rebate credit cards can be a nice way to earn some money back on spending. However, the bottom line is that a person needs to think about how much they are spending, not about how big the reward they get will be. This will help a person to use their cash rebate credit card responsibly.
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